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PSNH rate ruling called unfair, confusing

CONCORD - Allowing Public Service of New Hampshire to establish an alternative competitive rate is treating the symptoms of the company's problems in retaining customers, and not the illness, according to Dan Dolan, president of the New England Power Generators Association, which represents competitive electricity suppliers.

"It's trying to put a Band-Aid on a cancerous limb. That's not going to fix it," he said. "You have to hack the limb off. They have not addressed the fundamental problem - generating resources that are stuck in their rate base that the default customers are paying for."

By "generating resources," Dolan was referring to PSNH coal-fired power plants that are expensive to operate and cannot provide power at a price competitive with natural gas-fired plants, except during a few days of peak demand each year.

He said the only sustainable solution for PSNH in a competitive environment is to spin off the power plants into a separate subsidiary that could function as an energy supplier; to sell them off in the marketplace; or to shut them down with PUC approval.

In a deregulated environment, PSNH is supposed to be a distribution company, but the company was allowed to retain its power plants, making it both a distribution company and an energy supplier.

PSNH officials have maintained that the coal-fired plants provide needed diversity in a region that cannot afford to become overly reliant on natural gas due to limited pipeline capacity into New England.

A PSNH spokesperson said the alternative default rate gives the company and consumers time to adapt to a volatile competitive marketplace. Customers will go on the alternative rate if they return to PSNH after having been served by an independent supplier for 12 consecutive months or more. They can remain on the ADE rate for up to 12 months, before returning to the higher default rate or returning to a competitive supplier.

"The key point is every dollar billed at the ADE rate helps to lower costs that all other customers pay at the default rate," said PSNH spokesman Mike Skelton. "This new rate will benefit all customers."

Skelton said the company will work with the PUC to establish the actual ADE rate by July 1.

Competitive energy suppliers echoed Dolan's reaction.

"We are disappointed by this order. It's bad for competition and it doesn't address the big problem of PSNH's high-cost plants, guaranteed profit on the plants and the shrinking number of customers who have to pay for it," said Taff Tschamler, senior vice president for North American Power, which has been signing up electricity customers since December. "We also share the concerns expressed in PUC Commissioner Harrington's dissent that the new rate is in direct conflict with state law."

Kevin Dean, co-owner of ENH Power, said the alternative rate will only add uncertainty to a nascent competitive market still recovering from the confusion generated by the recent default of PNE Energy Supply, which briefly left about 8,000 customers wondering who was providing their electricity.

"We believe developments earlier this winter involving PNE hurt consumer confidence in the industry; this decision could again result in similar confusion," Dean said.